1. About Patrick Gracey
1.1. I am an Olivier Award-winning independent theatrical producer based in London’s West End. I have produced, co-produced and/or general managed over 40 shows in the West End, on Broadway, and in Australia.
2.1. In 2018, venues represented by The Society of London Theatre1 and UK Theatre2 generated ticket revenue of
£1.28 billion, reaching an audience of 34 million people.3
2.2. In addition, the theatre sector supports the UK’s multibillion-pound film and television industry4 by launching and nurturing the careers of actors5 and writers6 of the future.
2.3. The theatre sector is a complex ecosystem of different expertise including but not limited to writers, directors, designers, actors (and their agents), musicians, technical crew, casting directors, press agents, marketing agencies, design studios, rehearsal studios, lighting and sound hire companies, the actual theatre venues and their staff, all of whom are employed by or whose income is generated by producers and productions.
2.4. As a result of Covid-19, all theatres and productions across the UK have been closed.7 8 The impact has been “catastrophic”9. Social distancing is not possible in theatres, and it is anticipated that performances won’t be able to resume until next year10. Producers – and all the associated companies that derive revenue from
theatrical productions (including theatres) – will see zero income unless and until such time as performances re- commence. Even then, only 20% of audiences would return to venues “just because they open again”11.
Without financial support, the UK will become a “cultural wasteland”12.
2.5. Challenges. Once theatres re-open:
2.5.1. Audience Reluctance: Productions will have significant difficulty attracting an audience as theatregoers will be fearful of contracting Covid-19.13 14 15 16
2.5.2. Social Distancing: Social distancing is not possible in a theatre for either patrons or employees.17 18 Theatres need to either be fully open, or fully closed. The social distancing necessary for vulnerable groups and recommended for all people19 will make theatrical productions economically unviable.20 21
2.5.3. Reduced Demand: Demand for theatre will also be substantially lower due to an anticipated recession22, increased levels of unemployment, and drastically lower rates of international travel and tourism23 for at least 18 months.24
2.5.4. Difficulty Raising Investment: Raising investment will be increasingly difficult due to an increase in real and perceived risk by investors.
2.5.5. Insurance Risk: Productions will be unable to obtain cancellation insurance should any of the personnel employed on a production – including any stars – contract Covid-19.
2.6. Recommendations. In order to support producers and the theatre industry as a whole, the following government assistance is needed:
2.6.1. Support Businesses: Extend the business rates holiday25 to all businesses in the sector, not just theatres.
2.6.2. Protect Workers: Continue funding the Job Retention Scheme26 and the SEISS27 for the theatre sector at least until such time that a treatment is available or vaccine programme has been fully implemented.
2.6.3. Encourage Private Investment: Increase the rate of Theatre Tax Relief28 to 50% of 80% of total core expenditure for a period of three (3) years to include any productions that commenced rehearsals or performances from 1 January 2020 that have been affected by Covid-19.
2.6.4. Provide Stimulus: Provide stimulus by underwriting a Theatre Token29 distribution programme UK-wide for redemption at any participating theatre, with priority given to key workers.
2.6.5. Mitigate Risk: Provide or underwrite cancellation insurance for productions with respect to Covid-19.
As Sir Peter Bazalgette (then Chair of Arts Council England) noted in the report “The Value of Arts and Culture to People and Society”:
“When we talk about the value of arts and culture, we should always start with the intrinsic – how arts and culture illuminate our inner lives and enrich our emotional world. This is what we cherish.”30
3.1.1. According to DCMS, in 2018 the Creative Industries contributed £111.7 billion to the UK economy of which the Cultural Sector contributed £32.3 billion,31 employing 659,000 people, being 2% of all UK jobs.32
3.1.2. In 2018, venues represented by The Society of London Theatre33 and UK Theatre34 generated ticket revenue of £1.28 billion and VAT for the Treasury of £213 million, reaching an audience of 34 million people.35
3.1.3. In 2018/19 in England, 77% of adults (aged 16+) engaged with the arts36, and 29% of adults attended a theatre production.37
3.2.1. The UK is ranked number two on the Portland Soft Power Index, which reflects the value and importance of culture in maintaining its position as a global leader.38
3.2.2. Theatrical productions that originated in the UK in recent years before travelling the world include Harry Potter and the Cursed Child, Tina: The Tina Turner Musical, SIX The Musical, Matilda the Musical (Royal Shakespeare Company), and The Lehman Trilogy and The Curious Incident of the Dog in the Night Time (both National Theatre).
3.3.1. Theatre does not exist in a vacuum, rather, it exists within and is integral to the ecosystem of the wider arts sector. Many of the UK’s biggest stars of film and television first made their start in theatre, from Judi Dench39 and Ian McKellen40, to Jude Law41 and Vanessa Kirby42.
3.3.2. This influence continues behind the scenes. During the lockdown, 5.8 million people in the UK watched the final episode in real-time of the three-part limited television series, Quiz.43 It was written by James Graham, whose first play was produced at age 22 at the Finborough Theatre in 200544, and Quiz itself was an adaptation of Graham’s own play by the same name.
3.4.1. The arts make a significant contribution to the health and wellbeing of society as a whole. It can aid recovery, support longer lives better lived and help meet major challenges facing health and social care.45
3.4.2. As Matt Hancock noted in his first major speech as Health Secretary:
“We know what the NHS does is life-saving. But what the arts and social activities do is life- enhancing. You might get by in a world without the arts, but it isn’t a world that any of us would choose to live in.
We shouldn’t only value them for the role they play in bringing meaning and dignity to our lives. We should value the arts and social activities because they’re essential to our health and wellbeing.
It’s scientifically proven. Access to the arts and social activities improves people’s mental and physical health.”46
3.4.3. A key finding of DCMS’ annual Taking Part survey found that people who “have attended arts events in the last 12 months are significantly happier than those who have not, even when other factors influencing happiness are controlled for”47.
3.4.4. This also translates into real economic value. One arts-on-prescription programme found a 37% drop in GP consultation rates and 27% reduction in hospital admissions.48
4.1. There are effectively two main business models for producing theatrical productions in the UK:
4.1.1. Commercial theatre, which is generally produced by an independent producer or production company and funded solely through private investment and ticket sales; and
4.1.2. Non-profit theatre, which is generally produced by a business set up as a charity and may or may not receive government subsidy alongside philanthropic donations to supplement ticket sales such as the National Theatre.49
4.2. It is the producer who produces a stage production, not the theatre which is the venue. It is the producer who raises the capital and pays the fees and salaries of all personnel involved, pays rent and all operating costs to the theatre – including the cost of venue staff salaries – and pays fees and hire charges to third-party companies. A single production may support the salaries of over 200 people.
4.3. The people and companies involved in the staging of a theatrical production include but are not limited to writers, directors, designers, actors (and their agents), musicians, casting directors, marketing agencies, press agents, design studios, rehearsal studios, sound and lighting hire companies, a producer’s own employees, the theatre venue and its personnel including technical crew, front-of-house and box office staff. A production is only possible due to the contribution and work of all of these people.
4.4. In the case of most Arts Council-subsidised theatres and regional producing theatres, the theatre may act as the producer for some or most of the shows that are presented at the venue, but may also hire out their venue to third-party commercial producers.
4.5. Whilst some commercial theatre owners are also producers, most of the content that is presented at their theatres is produced by independent producers.
4.6. When a commercial production is staged in the UK, a producer raises private investment from third-party investors to capitalise the production.
4.7. The initial capital costs for a production may range from £750,000 for a mid-sized play to between £5,000,000 and £10,000,000 for a large musical. Weekly operating costs may range from £90,000 for a play to £300,000 or more for a musical. The weekly operating costs are funded from revenue through ticket and merchandise sales. Revenue from food, beverage and programme sales are retained by the theatre venue.
4.8. Investing in theatre is considered a high-risk investment. On average, only one-in-five shows recoup their initial capital investment.50
4.9. Accordingly, productions purchase cancellation insurance to provide coverage for a range of scenarios, including, for instance, should a star become ill. Without insurance, the show does not go on.
5.1. Since Monday 16 March 2020, theatres and theatrical productions throughout the UK have been closed51. The closure of theatres was in the public interest and the right course of action.
5.2. This has caused some shows to close permanently prior to the end of their scheduled run.52 Others have cancelled their run entirely.53 Many more shows have been postponed without knowing whether or not they will ever be rescheduled.54 55 56
5.3. 82% of all businesses within the arts, entertainment and recreation sector reported they had temporarily closed or paused trading as of 5 April per the ONS Business Impact of Coronavirus Survey (BICS).57 The creative industries will likely be more impacted than manufacturing or construction irrespective of the length of the lockdown.58
5.4. No one knows when theatres will re-open.59 60 It is possible that theatres may not be allowed to re-open until
2021.61 62 The challenges were highlighted by producer and theatre owner, Sir Cameron Mackintosh, in a BBC Radio 2 Interview, who noted, “Until social distancing doesn’t exist anymore, we can’t even plan to re-open. Each big musical has about 200 people working in that one building. We want the audience to feel safe, and we want the actors to feel safe.”63
5.5. Productions and all the businesses and individuals that rely on the revenue they generate will receive zero income unless and until theatres re-open and performances resume. Even once performances resume, some anticipate a persistent drop in audience levels of 20-30% at least until the end of the 2021/22 financial year.64
5.6. The Society of London Theatre and UK Theatre calculate the total loss of income to member venues resulting from a 12-week closure to be £630 million from ticket sales and ancillary income.65 Should a longer closure period be (understandably) necessary in order to prevent the ongoing spread of the virus, this will create even greater losses.
b o d ies add r ess t h e se cto r’s n e eds?
6.1. Job Retention Scheme (JRS)66: As of 5 April, businesses in the sector reported furloughing 68% of their workforce,67 a figure which has likely since increased. Unfortunately, most individuals in the sector are not classified as employees and are therefore ineligible for this scheme. Furthermore, given ongoing expenses and overhead costs, with zero income from productions, businesses that are still operating are doing so at a loss.
6.2. Self-Employment Income Support Scheme (SEISS)68: According to DCMS, 73% of the arts workforce is self- employed or a freelancer69, and due to the nature of theatre and the requirements of the SEISS, many freelancers cannot take full advantage of the scheme nor will it necessarily reflect the scale of their lost income from cancelled productions. These include but are not limited to: actors, musicians, writers, directors, and designers.
6.3. Business Rates: The business rates’ holiday70 which applies to theatres has not been extended to all parts of the industry, thus fails to support producers, theatrical agents, casting directors, marketing agencies, press agents, design studios, or rehearsal studios.
6.4. Coronavirus Business Interruption Loan Scheme (CBILS)71: Producers and theatres have seen income drop to zero. Similar to airlines, theatre tickets are a perishable good, therefore any loan scheme will simply increase the debt load of the borrower with no possibility that increased levels of future income will compensate for lost income during the current period. Furthermore, theatre productions are a high-risk venture that rely on private investment rather than loans to fund. As such, this scheme is of little value to most producers whose companies and productions generate revenue for the rest of the industry.
6.5. Arts Council England Bailout Fund72: This fund does not provide any benefit for commercial productions nor any of the tens of thousands of workers who are employed by those commercial productions. It has provided great support to National Portfolio Organisations (£90m), organisations outside of the National Portfolio (£50m), and creative practitioners and cultural workers (£20m)73; however, given the scale of the challenge and loss of income74, this may not be enough given the likely timescale until a return to “normal”.
7.1. Lockdown. Given the increased likelihood of transmission in theatres compared to other spaces, it is likely that the sector will (rightly) be one of the last businesses to return to normal.75 During the lockdown, productions are closed and will receive zero income. PWC anticipates that the leisure and hospitality sectors will be depressed for a period of three to five months following a lockdown.76 Given the effects of social distancing measures outlined below, it is likely to be an even longer road to recovery for the theatre sector.
7.2. Social Distancing. Social distancing is rightly recommended by scientists as a powerful and practical tool in reducing the spread of Covid-19 and will likely be a required practice at least until the end of the year77, and potentially until either a vaccine or treatment is developed.78 Social distancing is not possible in a theatre, either for patrons or employees, onstage or backstage.79 80 81  The UK government’s proposals for workplaces returning to work as outlined by the Defence Secretary, Ben Wallace,82 and in the guidance documents drawn up by Michael Gove and Alok Sharma83 do not address the sector as they are simply not possible in a theatre setting.
7.3. Audience Reluctance. Polling by Ipsos MORI found that only 17% of Britons say they would be comfortable attending large public gatherings (such as theatre) following the lockdown.84 A separate survey of 40,000 theatregoers in the UK found that only 20% of theatregoers would return to venues “just because they open again”85. What is even more worrying is a U.S. survey of theatregoers in the Washington, D.C. area which found that 27% saying that they would attend the theatre less often after this crisis.86 The core audience for theatre is aged 55 and older and are likely to be encouraged to continue social distancing unless and until a vaccine programme is widely implemented. It is therefore uncertain when people will feel safe enough to attend theatre in large enough numbers to cover weekly operating costs (let alone recouping capital expenditure) for some time once performances resume.
7.4. Reduced Levels of Tourism. A study conducted by Ipsos MORI found that 28% of visitors to the West End came from abroad87, with the number of visitors from the USA rising to 17% of all theatregoers. As of mid-April, Visit Britain anticipates an annual decline of inbound tourism spend of 54% and a decline in domestic tourism spend of 24%.88 Given recent reports of possible 14-day quarantine measures for anyone entering the UK89 and comments by the Home Secretary that “we rule nothing out”90, inbound tourist income for theatre will likely drop to near zero.
7.5. Recession. The UK economy is “plunging into a deeper recession than the 2008-09 financial crisis”91 with a global decline in GDP “twice as severe as the 2009 recession”.92 The leisure and hospitality sector has been “the worst hit and will be the slowest to recover”93 with a drop in GVA of between 15% to 28%.94 Even the UK’s Office of Budget Responsibility’s reference scenario anticipates a rise in unemployment to 10% which will decline more slowly than the anticipated GDP recovery.95 This will likely reduce demand for theatrical productions significantly.
7.6. Insurance Risk. Productions will be unable to obtain cancellation insurance should any of the personnel employed on a production contract Covid-19. Such insurance would normally apply should a star and/or multiple cast members become ill and cover the operating costs and potential box office losses for such period. Without such insurance – and with the risk that a single employee of the production or theatre testing positive for Covid-19 will cause a show to be shut down – producers cannot afford to take such risk. Furthermore, as social distancing is not possible in the theatre, neither producers nor theatres can take a risk with respect to their liability as employers.
7.7. Difficulty Raising Investment. Raising investment will be significantly more difficult due to an increase in real and perceived risk by investors caused by the above-mentioned impacts of Covid-19.
7.8. Continued Uncertainty. Producers and theatres plan and programme productions up to a year or more in advance. At this point in time, government have not provided any clear metrics or advice regarding a potential timeline for resuming performances. The sector will need significant lead time96 in order to plan and ramp up activities accordingly.
8.1. Support Businesses: Extend the business rates holiday – currently only available to theatres – to all businesses in the sector, including but not limited to: producers, casting directors, press and marketing agencies, design studios, and rehearsal studios.
8.2. Protect Workers: Continue funding the Job Retention Scheme and Self-Employed Income Support Scheme for the theatre sector until such time that a treatment is available or a vaccine programme has been fully implemented and theatres throughout the UK are fully operational and performances have resumed.
8.3. Encourage Private Investment: Increase the rate of Theatre Tax Relief to 50% of 80% of total core expenditure for a period of three (3) years to include any productions that commenced rehearsals or performances from 1 January 2020 that have been affected by Covid-19.
8.4. Provide Stimulus: Following the example of other economies that have provided vouchers to stimulate consumer spending97, provide stimulus by underwriting a Theatre Token programme UK-wide for redemption at any participating theatre, with a priority given to key workers. Given the benefits to health and wellbeing, and economic value to the wider economy98, this stimulus programme would provide benefit to the UK as a whole in recovering from the effects of Covid-19.
8.5. Mitigate Risk: Provide or underwrite the additional cost of cancellation insurance for productions with respect to Covid-19 on the terms normally provided for such cancellation insurance as purchased by theatrical productions.
9.1. Closure Advice. The government should have been more explicit and ordered theatres to close, rather than just advising people not to attend. This left the sector uncertain as to whether this advice was considered force majeure for contractual purposes and whether their insurance would cover the period of closure.
9.2. Government Support. Additional support specific to the sector and its unique challenges – including the large proportion of self-employed individuals – was necessary immediately following closure and the delays will have had lasting effects on organisations and individuals.
9.3. Period of Closure. Industry-wide consultation and advice from government is required to properly plan for an extended closure period, including any government-mandated requirements after re-opening.
10.1. Digital Theatre. The sector has managed to keep the spirit of theatre alive through digital screenings of previously filmed productions, best exemplified by the National Theatre At Home series.99 This has been a wonderful stop gap measure but does not and cannot replace live theatre. Income from digital theatre may supplement income to a given production from regular theatregoers, but the business model relies on the production already being staged with the inherent associated costs. Whilst additional financial incentives could be provided to encourage such filming in future, they would not replace traditional sources of income should a similar challenge re-occur in the future.100 Additional innovation in this area could be explored and supported to mitigate the effects of an event that produces a similar outcome occur in future.
10.2. Future Planning. Given the value of the sector to the UK economy, lessons learned from the effects of Covid- 19 including the types of financial support needed should be remembered for future planning for such an incident that requires the closure of theatres or live entertainment venues for any extended period.
May 2020 (Updated)
19 https://www.gov.uk/government/publications/covid-19-guidance-on-social-distancing-and-for-vulnerable-people/guidance-on-social-distancing-for- everyone-in-the-uk-and-protecting-older-people-and-vulnerable-adults
78 https://www.gov.scot/binaries/content/documents/govscot/publications/strategy-plan/2020/04/coronavirus-covid-19-framework-decision- making/documents/coronavirus-covid-19-framework-decision-making/coronavirus-covid-19-framework-decision- making/govscot%3Adocument/coronavirus-covid-19-framework-decision-making.pdf
i A “chequerboard” or similar solutions as have been proposed elsewhere would reduce the potential practical audience capacity for a theatre to less than 25 percent at which point weekly operating expenses for a production would far exceed potential ticket revenue. It would fail to achieve its aim in providing social distancing for audience members given the pinch points of ingress and egress both within the auditorium and from the venue itself. It would also fail to address the issue for members of the company including the cast and backstage crew.